Written by Gary
Closing Market Commentary For 10-22-2014
The averages generally melted down until 1:30 where they started trading sideways in a tight sea-saw fashion on sometimes anemic volume. European financial woes, US market problems and a host of other investors concerns have helped push the US averages back from advancing.
By 4 pm the DOW lost the most ground at -153 while the $NDX fared better at only -0.55%. Although a negative session, today does not define a market direction, but one of concern.
The SP500 slipped back below the 145 DMA, the DOW slipped back below the 200 DMA and the NASDAQ dropped down below its 100 DMA. The $VIX spent the afternoon climbing the bearish ladder and the oils were dropping again causing bullish investors to rethink their previous strategies.
A reminder, that a single session does not define a trend, but can cause one to wonder. Right now I am wondering if a second bottom is about to take place so I can BTFD!
The following article has some interesting arguments for why the market have and have not topped.
Over the past few weeks, the S&P 500 has corrected almost 10%
and for the first time in a long time, there was legitimate fear in the marketplace.
After St. Louis Federal Reserve President James Bullard's remarks, however, the market rallied back to 1935 where it stands today.
With the market's recent action, is this another buy the dip scenario or have we seen the top of the market?
In this article it would be prudent to be aware that, in the words of the late JP Morgan, he predicted, when asked for a stock market forecast, that "share prices would fluctuate". But are they going to fluctuate downward with more 'gusto' than usual?
Importantly, the deterioration in the internal dynamics of the market also suggest that the current rebound is not the resumption of the current bull market cycle, but rather a bounce that will likely be used to liquidate holdings. This will likely lead to a retest of lows, or even perhaps the setting of a new low, before a bullish trend can be re-established.
While I am not stating that the 'polar icecaps' are melting and that we are about to experience 'tidal destruction'; I am suggesting that the potential for further declines in the market are a significant possibility. Therefore, reducing portfolio risk in the short-term will provide capital to reinvest at a more favorable point in the future. If the market surges back to new highs, and re-establishes the previous "bull trend," then the capital raised can be reinvested with greater confidence of a continued advance.
There is little risk in practicing some form of portfolio 'risk management.' The real risk is doing nothing and then spending the next advance in the market making up previous losses. That has been a successful investment strategy 'nowhere, never.'
Our medium term indicators are leaning towards sell portfolio of non-performers at the close and the short-term market direction meter is VERY bearish. We remain mostly, at best, negative and conservatively bullish. The important DMA's, volume and a host of other studies have now turned and may be enough for some to start shorting. Right now now I am getting very concerned the current downtrend will get more aggressive in the short-term and volatility may promote sudden reversals. The SP500 MACD has turned up, but remains below zero at -19.62. I would advise caution in taking any position during this uncertain period and I hope you have returned your 'dogs' to the pound. Having some cash on hand now is not a bad strategy.
Investing.com members' sentiments are 38 % Bearish (falling from 70% and now rising from 33%) and it seems to be a good sign for being bearish. The 'Sheeples' always seem to get it wrong.
StockChart.com NYSE Bullish Percent Index ($BPNYA) is at 42.72. (Chart Here) Below support zone but rising. Next stop was ~57, then ~44, below that is where we will most likely see the markets crash. We are seriously below 44 and need a reversal pronto as it looks like there is nothing to stop the fall until 25 and taking the markets with it.
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) is at 46.80. (Chart Here) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. The next stop now is ~37.00.
StockChart.com 10 Year Treasury Note Yield Index ($TNX) is at 22.29. (Chart Here) Treasury Yield Curve Approaches Flattest Since 2009.
StockChart.com Overbought / Oversold Index ($NYMO) is at 65.30. (Chart Here) But anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. (Now were in excellent shape to descend again - watch out!)
Chris Ciovacco says, "As long as the consumer discretionary ETF (NYSEARCA:XLY) holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy." This chart clearly shows that dropping below 65.00 / 62.75 (and staying there) should be of a great concern to bullish investors.
This $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages.
Today it represents the lowest levels seen since the beginning of the October, 2011 rally. Eric Parnell says, ' If nothing else, given that relatively fewer stocks are trading above their 200-day moving average at a time when the market is just off of its all-time highs suggests that an increasingly narrowing group of stocks is driving the rally at this stage, which does not bode well for the future sustainability of the uptrend." It also strongly suggests there has been a 'stealth bear market' underway in recent months.
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) is at 46.23 %. (Chart Here) The downside decent has reversed, but will it continue to rise? The next support is ~37.00, ~25.00 and ~15.00 below that. December, 2012 was the last time we saw numbers this low.
StockChart.com NYSE Composite (Liquidity) Index ($NYA) is at 10,414. (Chart Here) We are above the resistance (10,301) but is this a test of the next resistance at ~10600, stay tuned. Next stop down is 9750, then 9250, and 8500.
The DOW at 4:00 is at 16461 down 153 or -0.92%.
The SP500 is at 1927 down 14 or -0.73%.
SPY is at 193.22 down 1.38 or -0.71%.
The $RUT is at 1097 down16 or -1.44%.
NASDAQ is at 4383 down 37 or -0.83%.
NASDAQ 100 is at 3950 down 22 or 0.55%.
$VIX 'Fear Index' is at 17.89 up 1.81 or 11.26%. Bearish Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is net negative, the past 5 sessions have been positive and the current bias is negative.
Saudi Arabia has reportedly been telling oil-market investors and analysts that it is ready to accept oil prices below $90 per barrel, and even as low as $80, for up to a year or two. If true, it would represent a major change in policy for Riyadh, which may be looking to slow the expansion of rivals such as the U.S.
WTI oil is trading between 83.12 (resistance) and 80.23 (support) today. The session bias is negative, volatile and is currently trading down at 80.36. (Chart Here)
According to Rob Kurzatkowski, Senior Commodity Analyst at OptionsExpress.com, ". . . we see the December Crude Oil contract holding above the $80 level. To this point, the contract has held up at this technical support level. More stout support can be found around the $75 mark, should Oil fail to hold $80. The result of recent price weakness has been oversold technical levels. The 14-day RSI is in the mid-teens, which could be supportive of prices in the near term. In order to gain some traction, Crude Oil prices may need to post several closes north of the $85 mark."
Monday, October 20, 2014 For those traders who really take a long view of market trends, looking at the monthly continuation chart for Gold futures, we notice that the bull market that began back in 2001 when Gold prices were... Read More...
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The general consensus is that gold prices will actually fall in the next twelve months (Sept to Aug. 2015). Goldman Sachs estimates that gold will fall to $1,050 an ounce, a drop of nearly 19%.
Gold fell from 1250.20 earlier to 1244.87 and is currently trading down at 1241.70. The current intra-session trend is negative. (Chart Here)
Dr. Copper is at 3.015 falling from 3.044 earlier. (Chart Here)
The US dollar is trading between 85.89 and 85.32 and is currently trading up at 85.84, the bias is currently positive. (Chart Here) Resistance made in Aug., 2013 (~85.00) has been broken and now is support.
The markets are still susceptible to climbing on 'Bernankellen' vapor, use caution!
"Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation inequities, they should try to be fearful when others are greedy and greedy only when others are fearful." - Warren Buffett
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Written by Gary